When it comes to things going wrong, we all like to think it won’t happen to us. Unfortunately, that attitude often extends to succession planning as well.
The thing is that life is full of surprises. Your trusty, long-serving CEO who you thought would be with the company for another decade or two might wake up one day, decide they want to teach yoga in the Himalayas, and hand in their resignation on the spot. Now, granted, that’s unlikely – but not impossible – and when you’re trying to future-proof a business, you want to protect it against any potential negative eventualities, no matter how small the chance of them happening.
Not giving succession planning any thought is the gravest error you can make, but it’s not the only one. Here are some of the succession planning lessons history has dished up:
1. The importance of establishing strong corporate governance structures for effective succession planning.
You need a proper corporate governance structure to truly facilitate objective and efficient succession planning. Consider the example of FTX, a company that used to be a crypto giant. Allegations of fraud aside (but certainly not forgotten), FTX did not have a Board of Directors until January 2022. Once it did form one, it was populated by the founder’s college buddies, and not the venture capitalists who invested in it. This means that no one was responsible for the company’s welfare and, consequently, no one was thinking about succession planning. Naturally, once FTX went bankrupt and its CEO stepped down, the company completely folded, losing $8 billion of customers’ money.
2. The necessity of consistently adhering to a succession plan and honoring your succession bench.
If you have a knowledgeable and trustworthy corporate governance structure, you’re still not out of the water. After all, the proof of the pudding is in the eating. Take the example of Disney’s Bob Iger, a revolutionary CEO who brought new life to the House of Mouse. Despite his undeniable success, his repeated postponing of retirement proved to be a double-edged sword. On one hand, his employees and colleagues rejoiced at the thought of him staying on, but on the other hand, it led to the sidelining of potential successors. As a result, many of those successors pursued other opportunities, leaving the company without the choice of potential successors it could have had when Iger finally did step down. This serves as a reminder that in succession planning, it’s important to nurture and cultivate a deep bench of eager successors.
3. The significance of shared responsibility in succession planning and avoiding overreliance on one individual.
Succession planning is a symphony of many instruments, each one with its own unique voice and role to play. The Board of Directors, however, should hold the baton. After all, even the greatest CEOs, like Disney’s Bob Iger, have their limits. Iger, known for his Midas touch, made a mistake by handpicking his own successor, who while highly experienced, lacked the qualities needed to keep the company’s performance at its peak. The result was a financial decline, and a decrease in stock prices. The situation got so dire that after three years Iger had to return from retirement and step back into his position as CEO to reinforce Disney’s performance. It serves as a reminder that succession planning is a team effort and no one individual should bear the weight of it alone.
4. The key to successful succession planning is careful selection and support of the right leader.
Succession planning is a dance between the past and the future. It is a delicate balance that requires both patience and preparation. Take the tale of Yahoo, for example. From 2007 to 2012, the company found itself in a whirlwind of CEO musical chairs, with five different leaders (including two interim CEOs) taking the reins, each one lasting between a mere four months and two and a half years before resigning or being unceremoniously shown the door. But why did so many of Yahoo’s CEOs fail to lead the company to success? The answer is simple: their succession planning process was unfortunately flawed. In many cases, there was no clear successor in sight when the previous CEO stepped down, leading to hasty interim replacements. In one particularly egregious example, one CEO lost their position because they lied about their qualifications, raising serious questions about the hiring process that led to their appointment. It is a cautionary tale that reminds us that true success in succession planning lies in the careful selection of the right leader, and in providing them with the support and guidance needed to thrive.
You Can Determine Your Own Legacy
The lessons of history remind us that the importance of strong corporate governance structures, consistent adherence to a succession plan, shared responsibility among leadership, and selecting and supporting the right leader are all key factors in ensuring a smooth transition of power and the continued success of the company. As leaders, it is our responsibility to think ahead and plan for the future to ensure that our businesses will thrive long after we are gone. By learning from the mistakes of the past and applying these lessons to our own succession planning, we can create a brighter future for ourselves and our companies.
At Stanton Chase, we have decades of experience in this field and can assist you in crafting the right succession plan for your company’s future. Don’t leave your company’s success to chance, let us help you navigate the road ahead. Click here to contact one of our consultants.
About the Author
Philippe is a Managing Partner and a member of several Practice Groups at Stanton Chase, including Consumer Products and Services, Industrial, CFO, Private Equity, and Life Sciences and Healthcare. Before joining Stanton Chase, he spent 14 years at another international executive search firm as an Executive Business Consultant. During this time, he also managed the firm’s global Life Science practice. Prior to this, he served as CFO and General Manager for three subsidiaries of the seed Group Limagrain.
Philippe has a Master of Business Administration from the Lyon Business School. Additionally, he is MBTI certified, and is qualified in assessment and personal development tools. He speaks French and English and works from Stanton Chase’s Paris and Lyon offices.